Legal News

Mark Glenn Ltd v HMRC [2024] UKFTT 715 ( TC) The appellant provided what is called the Kinsey System to clients experiencing hair loss. The Kinsey System entails placing a bespoke wig over the affected scalp area, with supplementary wig mesh used when required, allowing the piece to sit like a second skin while natural hairs emerge through the mesh and mingle with the wig fibres. The hair is subsequently cut and styled. Customers are expected to revisit the supplier roughly every six weeks. Visits recur on a rolling basis as part of service. The FTT determined—and the parties on appeal accepted—that delivering the Kinsey System amounted to a supply of services. Item 3, Group 12, Schedule 8 to the Value Added Tax Act 1994 ( VATA 1994) refers to ‘ The supply to a disabled person of services of adapting goods to suit his...

Data released on 7 August 2024 relates to the opening quarter of the 2024/25 tax year. Specialists report that the cumulative cost of overtaxation has climbed to almost £1.3bn since pension freedoms were brought in by the government in 2015. These provisions permit members of pension schemes aged 55 and above to withdraw a lump sum or take flexible income from their long-term savings. However, an oddity in the tax calculation process means many savers must initially hand over more than they actually owe when accessing their pension pots for the first time......

In this issue: Companies and corporation tax International Taxes management and litigation VAT Employment taxes Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Companies and corporation tax Extensive new R& D guidance published in CIRD Manual HMRC has issued comprehensive, updated guidance on the combined R& D expenditure credit regime and the enhanced R& D tax relief for R& D‑intensive, loss‑making SMEs. These constitute the two reformed arrangements that deliver corporation tax relief to companies for qualifying research and development costs incurred in accounting periods commencing on or after 1 April 2024. As highlighted in the HMRC Manuals tracker below, the fresh material, set out in the Corporate Intangibles Research and Development Manual ( CIRD Manual), sets out details of both regimes and shared concepts, including...

Peter Marano v HMRC [2024] EWCA Civ 876 The underlying dispute concerned whether the taxpayer was liable to penalties under Schedule 55 to the Finance Act 2009 ( FA 2009) for the late submission of a self-assessment tax return for the 2012–13 tax year. On or after 6 April 2013, HMRC served Mr Marano with a notice (the Notice) to file a self-assessment return for 2012–13, pursuant to section 8 of the Taxes Management Act 1970 ( TMA 1970). He did not deliver a return by the filing date of 31 January 2014, and so became liable to penalties under Schedule 55 for that failure. Accordingly, on 18 February 2014 HMRC issued late filing penalties. In November 2014, HMRC made a determination based on the figures contained in Mr Marano’s earlier years’ returns and levied a late filing penalty by reference to that...

In a report dated 29 July 2024, Hymans Robertson LLP argued that reshaping the existing pension tax relief regime could unlock more than £20bn each year for the new Labour administration to channel into the UK’s growth sectors. At present, the state offers tax relief on pension payments, providing savers with a financial nudge to contribute. Under this arrangement, basic-rate payers receive 20% relief, so £800 of net pay becomes a £1,000 pension input thanks to a £200 addition from the government. The policy aims to promote saving, yet a sizeable share is reclaimed when pensions are withdrawn in retirement, as that income is taxable. Typically, a standard employee hands back £150 of the £200 benefit through tax on their pension income. This cycle reflects how incentives are largely offset by later taxation ultimately......

In this issue: Budgets and Finance Bills Business structures VAT Taxes management and litigation International Employment Lex Talk®Tax: a Lexis®Nexis community Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Budgets and Finance Bills Autumn Budget date announced The Chancellor of the Exchequer, Rachel Reeves, stated in the House of Commons that the Autumn Budget will take place on 30 October 2024. See: LNB News 29/07/2024 82. Government publishes draft provisions for Finance Bill 2024 The government has released draft clauses for inclusion in Finance Bill 2025 ( FB 2025, also referred to as Finance Bill 2024–25), accompanied by explanatory notes and other supporting materials. It has also issued multiple policy papers setting out intentions to introduce further legislation across several areas at Autumn Budget 2024. The...

Reeves told the House of Commons that the incoming Labour administration must raise certain taxes and pare back expenditure to close a £22bn “black hole” in the public finances attributed to its predecessor. She said the Budget would require tough choices to satisfy fiscal rules spanning spending, welfare and taxation. Initial steps worth £5.5bn will arrive in October 2024 to begin bridging the shortfall, alongside departmental savings of at least £3.2bn, leaving a further £2.3bn to be met through extra tax receipts. A second package totalling £8bn is planned for next year. While she spoke, the Treasury opened industry consultations on scrapping preferential tax treatment for high-net-worth, non-domicile taxpayers, and separately on bringing “carried interest” paid to fund managers within the scope of income tax rather than capital gains. The proposals would align carried interest with income tax rates rather than capital gains. Under the...

The consultation on the draft legislation runs until 15 September 2024. FB 2025 is anticipated to be brought before Parliament after the Autumn Budget and is therefore expected to obtain Royal Assent in spring 2025. The complete set of measures for FB 2025 is available here, and the written ministerial statement by James Murray, Exchequer Secretary to the Treasury, summarising these measures is here. Draft legislation Three draft FB 2025 provisions have been issued, one of which is the Pillar Two anti-arbitrage rule designed to counter arrangements that exploit differences between tax and accounting rules, first announced in a written ministerial statement on 14 March 2024. For further details on that publication, see below. the abolition of the furnished holiday lettings regime, as announced at Spring Budget 2024 (see News Analysis: Spring Budget 2024— Tax analysis— Real estate taxes), and the removal of the VAT...

For the principal business tax measures, see News Analysis: Legislation Day: Draft Finance Bill 2025— Tax analysis. Also see: 2024: Non- UK domiciled individuals—policy summary Collection: Finance Bill 2024–25 — draft legislation and technical tax documents Initial reactions from the market Jeremy Woolf, Pump Court Tax Chambers: The most notable document among the technical tax papers issued on 29 July for Private Client practitioners is the one concerning the non-domiciled. It broadly reflects the last Budget’s proposals. It outlines a regime under which new residents would not be charged for four years on overseas income and gains, describing it as ‘internationally competitive’ and aimed at attracting top talent and investment to the UK. I worry that jurisdictions offering longer relief periods may appear more appealing. The paper also confirms the government’s rejection of the earlier idea of a specific transitional relief that would have given those who...

Lycamobile UK Ltd v HMRC [2024] UKFTT 638 ( TC) The case concerned Lycamobile UK Ltd (the Appellant)’s provision of plan bundles to UK customers, comprising calls, text messages and data. The FTT concluded that the predominant component was a supply of telecommunication services, and that any further services customers were entitled to access were merely ancillary parts of a single, overall supply of telecommunication services. In support of that conclusion, the FTT referred to the rulings in Card Protection Plan Ltd v HMRC ( C-349/96) and Purple Parking Ltd and Airport Services Ltd v HMRC ( C-117/11). The tribunal also rejected the Appellant’s submission that, at the point consideration was received, there was such uncertainty about the extent of a customer’s usage, the specific nature of the services that might be used, and the applicable VAT treatment, that VAT could not properly be...

Wardle v HMRC [2024] UKFTT 543 ( TC) What are the practical implications of this case? The long-standing issue of when a trade has begun has occupied the courts for over a century, albeit across differing statutory settings. In this dispute, the governing provisions were Chapter 3 of Part V, sections 169H to 169SA, of the Taxation of Chargeable Gains Act 1992 ( TCGA 1992), together with section 989 of the Income Tax Act 2007 ( ITA 2007). The FTT adopted Mansell, which concluded that a trade does not commence until it has been properly set up, to the extent required for it to operate (emphasis added). This outcome is pertinent whenever a factual determination is needed on the question of commencement of trade, yet the evidence shows that, at the relevant point of testing, the preparatory steps for that trade were not...

CCLA Investment Management Ltd v HMRC [2024] UKFTT 636 ( TC) CCLA supplied management services to investment funds whose investors included charities, Church of England bodies, and local authorities. These supplies had historically been treated as taxable, but the taxpayer later concluded they ought to have been exempt and submitted several claims for over-declared output VAT. The appeal covered thirteen funds, grouped into three categories: six COIFs six Church of England Central Board of Finance ( CBF) Funds one Local Authorities’ Property Fund ( LAPF) The applicable rules were those in force before the end of the Brexit transition period, and it was accepted that EU law had direct effect during that time. Consequently, the arguments concentrated on the EU provisions exempting the management of SIFs as defined by member states, rather than on UK domestic legislation. It was common ground that, prior to the end of...

HMRC v HFFX LLP; Atkins v HMRC [2024] EWCA Civ 813 What are the practical implications of this case? The judgment demonstrates that determining whether a ‘source’ exists for the purposes of identifying miscellaneous income under Chapter 8 of Part 5 of ITTOIA 2005 calls for close scrutiny of any applicable contractual rights together with the actual decisions made; taken together, these can suffice to show that what is received is not a simple gift and is taxable under ITTOIA 2005, s 687. The court considered whether a legal entitlement to the receipt is necessary for there to be a ‘source’, and whether the source must be ‘possessed’ by the taxpayer—that is, whether it can exist without a right to the income. It also addresses discretion and the application, in this setting, of the principle in Braganza v BP Shipping Ltd [2015] UKSC 17. In...

In this issue: Budgets and Finance Bills International companies and corporation tax Tax administration and litigation Property tax Employment taxes Daily and weekly news alerts New and updated content Revised Practice Notes Dates for your diary Trackers Useful information Budgets and Finance Bills Government publishes Budget Responsibility Bill The UK government has introduced a new Bill aimed at guaranteeing that any announcements of ‘fiscally significant measures’ receive an independent review by the Office for Budget Responsibility. See: LNB News 19/07/2024 7. Court of Appeal holds that stapled entity not entitled to double tax relief ( HMRC v GE Financial Investments) As highlighted in last week’s Tax weekly highlights, in GE Financial Investments [2024] EWCA Civ 797 the Court of Appeal upheld HMRC’s appeal. It decided that a UK-incorporated company stapled to a US entity—and therefore taxed in the US on a...

HMRC v GE Financial Investments [2024] EWCA Civ 797 The appellant company ( GEFI) was a UK-resident member of the GE group, acting as the limited partner in a Delaware limited partnership ( LP). The LP’s general partner was a US-resident group entity, GEFI Inc. For US federal income tax purposes, GEFI and GEFI Inc were treated as stapled entities, since shares in one could not be transferred unless the shares in the other were likewise transferred to the same recipient. As a result of that staple, GEFI became subject to US tax on its worldwide income. It claimed UK double tax relief in respect of the US tax for six consecutive accounting periods, but HMRC rejected each of those claims. The First-tier Tax Tribunal ( FTT) dismissed GEFI’s appeal, determining that it was not resident in the US under Article 4 of the US/ UK...

Cats North Sea Ltd v HMRC [2024] UKFTT 512 ( TC) What are the practical implications of this case? Although the statutory rules dealing with oil-related operations are fairly narrow in scope, the regimes on transfers of trade and capital allowances have a much broader application. The judgment provides a useful steer on how the FTT is apt to address thorny problems of statutory interpretation under those latter codes. In particular, it highlights the degree to which a legal fiction introduced by a deeming rule within these codes will be given effect. A principal question was whether a trade had been transferred where the transferor conveyed only part of a trade and the transferee was regarded as conducting two trades. The reasoning for treating that outcome as a transfer of a trade, and the effect of the singular encompassing the plural in this...

Finanzamt T v S , Case C‑184/23 The taxpayer ( S) controlled a university medical department and a second company ( U). All entities formed a German VAT group. S was the controlling company of both entities within the German VAT group structure. U furnished S with services such as cleaning, linen care and passenger transport in relation to the university medical department building. That building was used for a blend of taxable commercial activities and non‑economic teaching functions. At first, the German tax authorities considered U’s supplies not subject to VAT because they were made within a VAT group. Nonetheless, it also maintained that, where the services related to the non‑economic teaching activities, a deemed supply of services arose as they had been carried out for non‑business purposes. This dispute had already been resolved by the Court of Justice in the...

In this issue: Budgets and Finance Bills Companies and corporation tax Brexit and tax Real estate tax Individuals and income tax Stamp and transfer taxes VAT Daily and weekly news alerts New and updated content Dates for your diary Trackers New Q& As Useful information Budgets and Finance Bills King’s Speech 2024 His Majesty the King outlined the government’s priorities, agenda and intended measures for the forthcoming parliamentary session during the State Opening of Parliament on 17 July 2024. Initial reactions from the Private Client community to the announcements have been collated. See: LNB News 17/07/2024 92. CIOT letter to the new Exchequer Secretary to the Treasury The CIOT has written to the incoming Exchequer Secretary to the Treasury, James Murray MP, setting out tax matters for the new...

Woods v HMRC [2024] UKFTT 595 ( TC) FA 2022, s 97 was passed after the Upper Tribunal ( UT) ruling in Wilkes [2021] UKUT 150 ( TCC), which determined that a discovery assessment could not be made for the HICBC; that stance was later upheld by the Court of Appeal. FA 2022, s 97 revised the discovery provisions so that such assessments could be raised from 2021–22 onwards, and it also operated retrospectively to legitimise assessments for prior years that were classed as ‘protected assessments’. An assessment will not be protected where an appeal was lodged before 30 June 2021 and, by that date, the Wilkes point had been advanced by the taxpayer or the FTT, or the appeal had been stayed before 27 October 2021 on account of that point......

The Oaks ( Gatley) Ltd v HMRC [2024] UKFTT 594 ( TC) The taxpayer, The Oaks ( Gatley) Ltd ( TOGL), accepted it had not operated deductions at source on payments made to its construction services supplier, Dreamspace Construction Ltd ( Dreamspace), under the Construction Industry Scheme ( CIS). Nevertheless, Dreamspace included those sums when computing its corporation tax, so there was no overall loss to the Exchequer. Under regulation 9 of the CIS Regulations ( SI 2005/2045), an HMRC officer may direct that a contractor is not responsible for any shortfall between the tax it ought to have withheld and what it actually deducted where the sub-contractor has brought the payments into account. TOGL challenged the Determinations on public law grounds, asserting a legitimate expectation that HMRC would apply its published guidance before raising the Determinations. It said that guidance required an officer to have (i)...